Anyone with a life insurance policy they haven’t carefully read will want to do so ASAP after they learn about one widow’s unsuccessful fight with her dead husband’s life insurer.

It all started when Craig Bauer, an executive at manufacturer Omron Electronics, died in June 2006 of bacterial meningitis following a business trip that included stops in Brazil, China and Japan. Bauer had life insurance through his employer. The policy stated that in the event of his dying accidentally, his survivors would be entitled to a payment representing “five times base annual earnings to a maximum of $250,000.”

After his death Bauer’s widow submitted a claim to the life insurer, Reliance Standard Life Insurance Co. She figured that since her husband’s yearly base salary had exceeded $250,000, the payout would be that amount, quintupled: $1.25 million.

But when the check from Reliance finally arrived, it was for $250,000 (plus a nominal amount of interest.) Seems the insurer was claiming that the $250,000 maximum referred to in Bauer’s policy applied to the overall payment – and not to the deceased’s annual salary.

The Bauer-Reliance dispute ultimately wound up in court. Now a federal judge in Philadelphia has ruled Reliance was correct to pay out only $250,000; the insurer’s interpretation of the disputed phrase was reasonable, according to the judge, and did not render meaningless any other terms in the policy.

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